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When recognition is done right, it fosters a positive workplace culture of camaraderie, well-being, and productivity — effectively combatting challenges like employee stress and low engagement. In fact, a recent study found that among professionals who are highly satisfied, nearly three-quarters reported receiving recognition at least a few times per month.

Nearly every CEO I meet understands the importance of employee engagement. They believe in the power of recognition. They know that engaged employees are more productive, that culture drives retention, and that a motivated workforce leads to better business outcomes. But here’s the problem—too many leaders stop at believing. They’re not actually investing. They’re not putting their budget where their values are. And the cost of inaction is adding up.

As a performance management tactic, year-end reviews are a valuable tool for promoting employee development and aligning individual tasks with broader company strategy. Research has found that companies that focus on their people’s performance are 4.2 times more likely to outperform their peers.